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Lets also not forget that Fed prints tens of billions of dollars per month. All this money has to go somewhere and today a good chunk of it goes to all sorts of

Lets also not forget that Fed prints tens of billions of dollars per month. All this money has to go somewhere and today a good chunk of it goes to all sorts of investors buying stocks and pre-IPO shares of tech startups. That's the only logical explanation for crazy valuation of profitless Twitter, Instagram, Snapchat and others. Also, the only explanation for why most people producing real goods on factories and farms in US and all over the world are getting poorer while guys coding services that waste money for years still get huge salaries. I'm not saying that all of Silicon Valley is producing worthless stuff. I'm saying there is a distortion on the market caused by "free money" (compared to money that has to be saved and withdrawn from others, less profitable activities). Without it SV would still be a great and pricey place, but not hugely at the expense of everyone else like it is today. PS. Before we start a flame about "crazy libertarians", consider what's more crazy: me questioning Fed's policies, or the fact that war in Iraq costed $6 trillion and killed 1 mln people (http://en.wikipedia.org/wiki/Financial_cost_of_the_Iraq_War http://en.wikipedia.org/wiki/Financial_cost_of_the_Iraq_War). That wouldn't be possible at all if the Fed couldn't create money out of thin air. Once you deal with morality of this situation, only then please criticize me about my opinion on QE and other monetary policies in general.

BadassFractal 13y ago
Man, think of everybody else we could blame for this. Why limit it to just the Fed? Let's be more generous. The 1%, the poor, the black, the racists, the gays, the Jews, the immigrants, the socialists, the liberals, the neo-cons, the Kochs, the healthcare cartels. Everybody's at fault.
- w0utert 13y ago
  That's a bit of disingenuous strawman comment. No matter what you think about the price of coffee and toast in SF, you'd have to be blind, in denial, or suffer from amnesia if you think valuations of stocks in general and tech stocks in particular are based on anything else but free money funneled into a system that would collapse without it.
justincormack 13y ago
This fairy story about all the money coming from the Fed's printing press is basically a misunderstanding. The money was all created by the banking system via leverage before the bubble, and the Fed basically stopped all that money being destroyed at once via defaults. letting the people who got the money created (printed if you like) by the private sector keep it.
- oleganza 13y ago
  As far as I know, Fed prints around $80 billion since 2012 and does it today. All this money does not just sit somewhere, but is being "invested" to "stimulate the economy". Sources are listed here: http://en.wikipedia.org/wiki/Quantitative_easing http://en.wikipedia.org/wiki/Quantitative_easing Then, you ignored the fact that existing Fed policy made possible murder of 1 million people over several years at a cost of $6 million per person. There were no taxpayers or private investors who'd save that much money to invest in a large scale murder operation. It was all possible because of Fed, legal tender laws and tons of regulations that make sure people have to accept USD as money. I think it is important to understand that to see the power that the Fed has and how much lives are affected by that power. It just gives the proper context.
- 001sky 13y ago
  This fairy story about all the money coming from the Fed's printing press is basically a misunderstanding Excess liquidity reduces the scarcity value of money, and results in lower quality thresholds for investment decisions. Thats pretty simple. If you want to debate about liquidity, you need to look at who invests in the investors. That is the place to measure liquidity that is relevant to distorting investment decisions. In the case of non-public equity...its pretty clear VC lps have too much cash. The Kaufman fund does research in this area and blames poor LP performance for the below-RAROC returns on VC portfolios when considered as an asset class. That should tell you something right there.

BadassFractal 13y ago

Man, think of everybody else we could blame for this. Why limit it to just the Fed? Let's be more generous. The 1%, the poor, the black, the racists, the gays, the Jews, the immigrants, the socialists, the liberals, the neo-cons, the Kochs, the healthcare cartels. Everybody's at fault.

w0utert 13y ago
That's a bit of disingenuous strawman comment. No matter what you think about the price of coffee and toast in SF, you'd have to be blind, in denial, or suffer from amnesia if you think valuations of stocks in general and tech stocks in particular are based on anything else but free money funneled into a system that would collapse without it.

justincormack 13y ago

This fairy story about all the money coming from the Fed's printing press is basically a misunderstanding. The money was all created by the banking system via leverage before the bubble, and the Fed basically stopped all that money being destroyed at once via defaults. letting the people who got the money created (printed if you like) by the private sector keep it.

oleganza 13y ago
As far as I know, Fed prints around $80 billion since 2012 and does it today. All this money does not just sit somewhere, but is being "invested" to "stimulate the economy". Sources are listed here: http://en.wikipedia.org/wiki/Quantitative_easing http://en.wikipedia.org/wiki/Quantitative_easing Then, you ignored the fact that existing Fed policy made possible murder of 1 million people over several years at a cost of $6 million per person. There were no taxpayers or private investors who'd save that much money to invest in a large scale murder operation. It was all possible because of Fed, legal tender laws and tons of regulations that make sure people have to accept USD as money. I think it is important to understand that to see the power that the Fed has and how much lives are affected by that power. It just gives the proper context.
001sky 13y ago
This fairy story about all the money coming from the Fed's printing press is basically a misunderstanding Excess liquidity reduces the scarcity value of money, and results in lower quality thresholds for investment decisions. Thats pretty simple. If you want to debate about liquidity, you need to look at who invests in the investors. That is the place to measure liquidity that is relevant to distorting investment decisions. In the case of non-public equity...its pretty clear VC lps have too much cash. The Kaufman fund does research in this area and blames poor LP performance for the below-RAROC returns on VC portfolios when considered as an asset class. That should tell you something right there.